Discuss the goals of a firm and analyse the issues that impact on the ability of Australian firms to engage in external economies of scale.

Essay by gundwingHigh School, 11th grade May 2006

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Businesses and firms are a vital part of the economy. They are organisations that effectively combine the factors of production to provide a good or a service. Firms are the major production units within the Australian economy. Their size, behaviour and performance impact upon the overall productive capacity. Firms contribute towards the growth of the economy with the production of goods with growth in sales, employment and regional development. Growing businesses will employ more people and in turn reduce the level of unemployment and allow for the growth of the economy to the production possibility curve for the economy. With the growth of industries, firms will continue to expand throughout other areas of the country which will bring out improved infrastructure and services to the area.

The success of the firm depends upon its application of its goals or objectives. Maximising profits, meeting shareholder expectations, increasing market share, maximising growth or satisficing behaviour are some of the goals or objectives that a firm may employ.

The objective of maximising profits appears to apply to the majority of firms within the economy. To maximise revenue whilst achieving minimum production costs results with maximum profits. However, maximum profits are not the only goals of a firm to increase market share and to maximise growth may also be associated with the maximising of profits. These profits can be used to expand upon the firm to grow. The firm's market share can be increased with the profits being reinvested within diversifying the company's production. Shareholder expectations are also goals that a firm may be committed towards but may be conflicting towards the firm's greater objectives. Shareholders are often more interested in maximising short term returns upon their investments rather that the long term value of the company. Satisficing behaviour is a mix of all...